Resolution Trust Corporation: Analysis of Selected Asset Sales and
Financial Data (Letter Report, 02/01/94, GAO/GGD-94-37).

For most of the 5,156 assets it reviewed under nine Standard Asset
Management and Disposition Agreement (SAMDA) contracts, GAO was unable
to determine holding costs/revenues, holding times, or net recovery
rates for disposed assets because the data were either not readily
available or were unreliable.  GAO discovered that (1) the Resolution
Trust Corporation (RTC) had not established uniform reporting
requirements for the financial data and (2) for the assets sold by RTC,
final sales information was not always provided to SAMDA contractors
promptly.  Without this information, neither the sales proceeds nor the
recovery rates could be determined.  RTC has since established uniform
requirements for reporting assets sales and financial data.  Out of the
5,156 assets, GAO analyzed the financial data for 1,654 assets for which
complete revenue and expense data were available.  GAO identified those
asset types with the highest holding costs, those types that remained in
the inventory for the longest time, and those types that produced the
highest rates.  If RTC has done such an analysis, it could have used the
results to make more information decisions about managing its portfolio.
Taken together, these factors--net holding costs and revenues, holding
times, and net recoveries--along with factors such as availability of
buyers and market outlook can help managers decide whether and when it
makes sense to dispose of assets and maximize net recoveries for RTC.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-94-37
     TITLE:  Resolution Trust Corporation: Analysis of Selected Asset 
             Sales and Financial Data
      DATE:  02/01/94
   SUBJECT:  Assets
             Bank failures
             Financial management systems
             Real estate sales
             Property disposal
             Reporting requirements
             Management information systems
             Federal property management
             Savings and loan associations
             Insured commercial banks
IDENTIFIER:  RTC Standard Asset Management and Disposition Agreement
             RTC Asset Manager System
             
**************************************************************************
* This file contains an ASCII representation of the text of a GAO        *
* report.  Delineations within the text indicating chapter titles,       *
* headings, and bullets are preserved.  Major divisions and subdivisions *
* of the text, such as Chapters, Sections, and Appendixes, are           *
* identified by double and single lines.  The numbers on the right end   *
* of these lines indicate the position of each of the subsections in the *
* document outline.  These numbers do NOT correspond with the page       *
* numbers of the printed product.                                        *
*                                                                        *
* No attempt has been made to display graphic images, although figure    *
* captions are reproduced. Tables are included, but may not resemble     *
* those in the printed version.                                          *
*                                                                        *
* A printed copy of this report may be obtained from the GAO Document    *
* Distribution Facility by calling (202) 512-6000, by faxing your        *
* request to (301) 258-4066, or by writing to P.O. Box 6015,             *
* Gaithersburg, MD 20884-6015. We are unable to accept electronic orders *
* for printed documents at this time.                                    *
**************************************************************************


Cover
================================================================ COVER


Report to the President and Chief Executive Officer, Resolution Trust
Corporation

February 1994

RESOLUTION TRUST CORPORATION -
ANALYSIS OF SELECTED ASSET SALES
AND FINANCIAL DATA

GAO/GGD-94-37

Analysis of Selected RTC Asset Sales


Abbreviations
=============================================================== ABBREV

  AMS - Asset Manager System
  ERV - estimated recovery value
  REOMS - Real Estate Owned Management System
  RTC - Resolution Trust Corporation
  SAMDA - Standard Asset Management and Disposition Agreement

Letter
=============================================================== LETTER


B-254433

February 1, 1994

The Honorable Roger C.  Altman
President and Chief Executive Officer
Resolution Trust Corporation

Dear Mr.  Altman: 

This report presents the results of our analysis of the costs and
revenues as of March 31, 1992, associated with about 1,700 Resolution
Trust Corporation (RTC) assets under 9 Standard Asset Management and
Disposition Agreement (SAMDA) contracts.  We analyzed this data to
show how, as we discussed in our testimony in March 1993, key
financial information can be used to help plan asset disposition
strategies that maximize recoveries.\1 The objectives of this review
were to collect and analyze data on holding costs/revenues, holding
times, and net recovery rates for various RTC assets and to
demonstrate how this information could be used by RTC.  Additional
data from our analyses and our sample selection process appear in
appendixes I through III. 


--------------------
\1 Resolution Trust Corporation:  Funding, Organization, and
Performance (GAO/T-GGD-93-13, Mar.  18, 1993). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

For most of the 5,156 assets included under the 9 SAMDA contracts
reviewed, we were unable to determine holding costs/revenues, holding
times, or net recovery rates for disposed assets because the data
were either not readily available or were unreliable.  Further, we
determined that (1) RTC had not established uniform reporting
requirements for the financial data; and (2) for the assets sold by
RTC, final sales information was not always provided to SAMDA
contractors in a timely manner.  Without this sales information,
neither the sales proceeds nor the recovery rates could be
determined.  After we completed our review, RTC established uniform
requirements for reporting asset sales and financial data as part of
the process to improve its corporatewide system to manage asset
management contractors, called its Asset Manager System (AMS). 

Out of the 5,156 assets, we analyzed the financial data for 1,654
assets for which complete revenue and expense data were available. 
We grouped the assets into nine types\2 and then divided them on the
basis of whether they were disposed or remained in the inventory.  We
calculated the net holding amounts on an annual basis in order to
allow for a more consistent analysis.  Our analysis found the
following: 

  For assets remaining in inventory, six of the nine asset types
     incurred average annualized net holding costs, ranging from 0.38
     to 2.68 percent of book value.  The remaining three asset types
     incurred average annualized net holding revenues. 

  For disposed assets, five asset types incurred average annualized
     net holding costs, ranging from 0.61 to 4.99 percent of book
     value.  The remaining four asset types incurred average
     annualized net holding revenues. 

  Average annualized net holding costs for real estate assets, both
     disposed and those still in inventory, tended to vary according
     to the asset's book value; generally, higher value assets were
     less costly, as a percentage of book value, than lower value
     assets. 

  Average holding times were longest for nonperforming
     commercial/consumer loans and other performing loans, and
     overall average holding time was 232 days for disposed assets
     and 389 days for assets still in the inventory. 

  Net recovery rates for disposed assets averaged about 51 percent of
     book value and 78 percent of RTC's Estimated Recovery Value
     (ERV).\3

Our analyses identified those asset types with the highest holding
costs, those types that remained in the inventory for the longest
time, and those types that produced the lowest recovery rates.  If
RTC had completed such an analysis, it could have used the results to
help make more informed decisions about managing its portfolio. 
Taken together, these factors--net holding costs and revenues,
holding times, and net recoveries--along with other factors such as
availability of buyers and market outlook, can help managers
determine whether and when it is economically prudent to dispose of
various asset types and help RTC maximize net recoveries. 


--------------------
\2 The nine asset types are (1) loans-commercial/consumer
nonperforming (LCNP), (2) loans-other nonperforming (LONP),
(3)loans-other performing (LOP), (4) loans-other (LO), (5) real
estate owned office/retail (REOOR), (6) real estate owned multifamily
(REOMF), (7) real estate owned single-family (REOSF), (8) real estate
owned land (REOL), and (9) real estate owned other (REOO). 

\3 The estimated recovery value (ERV) is an amount assigned by RTC
and adjusted based on changes to the condition of the asset.  This
value is the basis for some fee payments made to the SAMDA
contractor, but it is not the value used to estimate recoveries for
RTC's financial statements.  We have not assessed the reliability of
these values. 


   BACKGROUND
------------------------------------------------------------ Letter :2

RTC is responsible for managing and disposing of assets from failed
thrifts and for maximizing net recoveries from the sale of these
assets.  RTC relies heavily on private sector
contractors--principally SAMDA contractors--to manage and dispose of
its assets.  As of January 1993, RTC had awarded 236 SAMDA contracts
to manage and dispose of assets with total book value of $37.2
billion. 

SAMDA contractors manage and dispose of both loan and real estate
assets.  The loan assets are often secured by single-family homes,
multifamily units, commercial buildings, land, or other assets, such
as automobiles, mobile homes, and construction projects.  Loan assets
are either performing, meaning that payments are being made on a
timely basis, or nonperforming, meaning that payments have not been
kept current.  Real estate assets in SAMDA contract portfolios
largely consist of office/retail properties, multifamily units,
single-family homes, land, and other assets, such as storage
facilities, airports, and daycare centers. 

SAMDA contractors are paid management, disposition, and incentive\4
fees to manage and dispose of these assets.  The fees are based on
the assets' ERV, which RTC assigns when the asset is first
transferred to the SAMDA contractor.  RTC can adjust the ERV on the
basis of changes to the condition of the asset.  For example, the ERV
could be reduced due to casualty losses.  ERV is not the value RTC
uses to estimate overall recoveries for its annual financial
statements. 

While the assets are in the SAMDA contractors' inventory, RTC may
incur holding costs.  These costs consist of management fees paid to
the contractor and expenses associated with the assets, such as
taxes, maintenance costs, and utility charges.  Holding costs also
include disposition and incentive fees paid to the contractor when an
asset is removed from the inventory as well as fees associated with
selling the assets, such as legal expenses.  Any money RTC receives
from the asset, such as loan payments, interest payments, or rental
fees, is considered a holding revenue.  The net holding amount for an
asset is calculated by subtracting the holding costs from the holding
revenues. 

The net holding amount is one of the key factors in determining net
recovery values for RTC assets.  Sales price minus the net holding
amount yields the net recovery amount.  The ratio of the net recovery
amount to either the assets' book value or ERV produces the net
recovery rate. 


--------------------
\4 Incentive fees are amounts paid to the SAMDA contractor if assets
are sold within 2 years. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
------------------------------------------------------------ Letter :3

The objectives of this assignment were to determine holding times,
holding costs, holding revenues, and net recovery rates for various
RTC asset types and to analyze the results in order to demonstrate
the usefulness of such an analysis in managing RTC assets.  We
judgmentally selected nine SAMDA contracts awarded between October 1,
1990, and January 1, 1991.  We used January 1, 1991, as a cut-off
date to ensure that sufficient time had passed to allow the
contractors to dispose of some of the assets. 

These nine contracts were managed by four different field offices,
including two from the Atlanta Field Office, two from the Baton Rouge
Field Office, three from the Dallas Field Office, and two from the
Houston Field Office.  We chose these contracts because they had a
relatively small number of assets with a relatively high value in
comparison to the other contracts at those offices.  The contracts
involved a total of 5,156 assets with a book value of $1.473 billion. 
We attempted to determine average direct holding costs and revenues
and average holding periods for all these assets.  We also attempted
to determine net recovery rates for all disposed assets.  Appendix I
provides additional information on the numbers and types of assets we
examined. 

To collect information, we contacted officials at RTC headquarters,
officials in RTC field offices, and SAMDA contractors.  We gathered
information on asset type, book value, estimated recovery value, and
effective date of the contract or when the asset was added to the
contract.  We attempted to find out the revenues earned and the
expenses and management fees incurred for each asset from the time
the asset was added to the inventory through March 31, 1992.  For
disposed assets, we also tried to obtain the disposal date, sales
price, contractors' fees, and sales proceeds. 

We grouped the assets by asset type, disposal status--disposed or
remaining in inventory--and book value.  For the 1,654 assets with a
book value of about $721 million for which the revenue and expenses
data were available, we subtracted the holding expenses and fees from
the holding revenues to calculate net holding costs or net holding
revenues.  Since assets had varying holding times, we annualized the
net holding amounts in order to equalize the differing holding times
and allow for a more consistent analysis.  We calculated the net
holding amounts by dividing the actual net holding amount by the
proportion of the year that the asset was actually held.  For the
disposed assets, we also added in the disposition, incentive, and
other fees associated with selling the assets. 

In addition, we calculated the net recovery rates for 590 of the
disposed assets for which complete data were available.  We
determined the net recovery amount by subtracting the net holding
amount from the sales proceeds data.  Then we divided this amount by
the assets' book value and ERV to determine the recovery rate.  The
results from our analysis are based on the data available on the
1,654 assets and cannot be projected to all RTC assets.  However, we
believe the results show the benefits of analyzing such financial
data. 

We gathered the data for this report between October 1991 and April
1992, in conjunction with our efforts to monitor other aspects of the
SAMDA program.  We completed our analysis of the data between August
1992 and July 1993.  This work was done in accordance with generally
accepted government auditing standards. 


   COMPLETE FINANCIAL DATA WERE
   NOT AVAILABLE
------------------------------------------------------------ Letter :4

We found that for 3,502 assets, 68 percent of the 5,156 assets we
reviewed, neither RTC nor the SAMDA contractor could provide all of
the key financial data--expenses, revenues, disposition dates, sales
prices, and contractor fees--needed to determine the holding costs or
holding revenues.  These financial data reflect the actual cash
flow--money paid out for expenses and money received as income from
rents and other sources.  Without important financial data, including
revenues, expenses, and recovery values, RTC is unable to monitor
costs.  With such asset sales and financial data, trends could be
identified to help RTC maximize recoveries, better manage its
portfolio, and target its disposition methods. 

Data on expenses and revenues could not be analyzed because they were
not readily available or were unreliable.  For one contract with more
than 1,700 assets, the contractor told us that revenue and expense
receipts for each asset were maintained within manual files and would
not be totaled until the asset was disposed.  For another contract
with more than 900 assets, RTC had not provided the contractor with
all of the needed information.  The contractor did not have data on
all loan payments, loan terms, or sale amounts.  Both of these
contracts were managed by the same RTC field office.  Further, for
another contract with over 800 assets, although the contractor
provided sales and other financial data for the assets, we found
numerous errors and inconsistencies with the information and
therefore deemed it unreliable.  These three contracts accounted for
nearly all of the assets for which we could not complete our
analyses. 

Although the SAMDA contract required the contractor to report income
and expense data for each asset, at the time of our review RTC had
not established agencywide requirements for reporting expenses and
revenues for each asset.  According to RTC officials, each field
office determined the reporting requirements, and contractors were
generally required to report on their total portfolio of assets.  Two
of the four RTC offices we visited required their contractors to
report whether the total expenses exceeded the budgeted amounts. 
Reports on revenues and expenses for individual assets were not
required by two of the four offices until the asset was disposed
while the other two offices required their contractors to report this
information on a regular basis. 

In addition to having inconsistent reporting requirements, RTC did
not always provide final sales information to the SAMDA contractors
in a timely manner for those assets it sold in portfolio sales or
auctions.  SAMDA contractors need the final sales information in
order to compute the sales proceeds amount.  Furthermore, the sales
proceeds amount is needed to determine recovery rates.  Over 200
assets from the 806 disposed assets in our sample did not have the
sales proceeds data needed to determine recovery rates.  Although the
sales were completed several months prior to our review, RTC had not
provided sales information.  For example, 1 contractor told us that
about 200 assets had been sold through an RTC portfolio sale 8 months
before our visit.  However, because RTC had not provided confirmation
of the sales and the sales prices, the contractor had not summarized
the expenses and revenues for these assets and could not calculate
the net proceeds. 

According to RTC officials, its procedures changed in 1993 and
contractors began reporting asset sales and financial data uniformly
via AMS.  In addition, RTC plans to record the results from the
auction and portfolio sales in AMS shortly following these events. 
RTC established a September 1993 date for completion of the data
input and plans to begin verifying the data in January 1994.  When
fully implemented, this uniform reporting system should provide RTC
with the sales and financial data needed to help manage its assets. 
However, we did not determine whether RTC addressed previously
reported problems with AMS.\5


--------------------
\5 In March and October 1992, we reported that AMS had (1) inadequate
system interfaces between RTC and the asset managers to account for
the contractors' income and expenses and (2) insufficient security
controls and reconciliation reports to ensure proper funds transfers
(Resolution Trust Corporation:  Status of Asset Manager System,
GAO/IMTEC-92-34BR, Mar.  5, 1992; and Resolution Trust Corporation: 
Asset Management System, GAO/IMTEC-93-9R, Oct.  28, 1992). 


      MOST ASSET TYPES INCURRED
      NET HOLDING COSTS
---------------------------------------------------------- Letter :4.1

For each of the 1,654 assets for which we had data, we determined the
total direct holding revenues and expenses.  When expenses and fees
exceeded revenues, the result was a net holding cost.  If revenues
were greater than expenses and fees, the result was a net holding
revenue. 

We found that overall, for 848 assets remaining in RTC's inventory as
of March 31, 1992, the average annual net holding cost was 0.42
percent of book value.  Six asset types incurred net holding costs
and three types earned net holding revenues.  The six asset types
incurring net holding costs were (1) commercial/consumer
nonperforming loans, (2) other loans, (3) office/retail real estate,
(4) single-family real estate, (5) real estate owned land, and (6)
other real estate.  For the group of 194 commercial/consumer
nonperforming loans--whose average book value was $237,057--the
average net annual holding cost was $905 per loan.  Similarly, for
the group of 40 assets classified as other real estate--whose average
book value was $350,231--the average annual net holding cost was
$9,382.  Holding costs varied from 0.38 percent of book value for
commercial/consumer nonperforming loans to 2.68 percent of book value
for other real estate.  Our analysis shows that two asset types--real
estate owned land and real estate owned other--had average annualized
net holding costs as a percent of book value at least two times
greater than other asset types.  RTC could consider this type of
information when making decisions about managing its portfolio. 
Three types of assets remaining in inventory produced net revenues. 
Average annual net holding revenue was 1.29 percent of book value for
other nonperforming loans, 2.32 percent for multifamily real estate,
and 3.21 percent for other performing loans.  Table 1 shows the
average annual revenues, expenses, and net holding amounts by type
for assets remaining in inventory. 



                                     Table 1
                     
                      Average Annualized Revenues, Expenses,
                        and Net Holding Amounts for Assets
                     Remaining in Inventory, as of March 31,
                                       1992


                                                                         Average
                                                                  annualized net
               No.    Average                       Total direct  holding amount
                of       book                        net holding   as percent of
Asset type   cases      value   Revenues  Expenses        amount      book value
----------  ------  ---------  ---------  --------  ------------  --------------
Nonperform     194   $237,057     $3,845    $4,750        $(905)          (0.38)
 ing
 commercia
 l/
 consumer
 loans
Other          322    361,338      9,279     4,628         4,651            1.29
 nonperfor
 ming
 loans
Other            9  1,076,156     41,126     6,607        34,518            3.21
 performing
 loans
Other           21    666,613          0     5,081       (5,081)          (0.76)
 loans
Real            61  1,946,951    163,378   181,934      (18,556)          (0.95)
 estate
 owned
 office/
 retail
Real            28  1,644,798    227,643   189,442        38,201            2.32
 estate
 owned
 multifami
 ly
Real            65     72,739      2,786     3,219         (433)          (0.59)
 estate
 owned
 single-
 family
Real           108  1,294,863      3,350    32,953      (29,602)          (2.29)
 estate
 owned
 land
Real            40    350,231     23,315    32,697       (9,382)          (2.68)
 estate
 owned
 other
================================================================================
Total          848  $600,737\  $25,848\a  $28,368\    $(2,520)\a        (0.42)\a
                            a                    a
--------------------------------------------------------------------------------
Note:  Numbers in parentheses ( ) represent holding costs.  The data
are as of March 31, 1992. 

\a = Weighted averages

Source:  SAMDA contractor asset files. 

Among disposed assets, we found that five asset types incurred
average annual net holding costs--(1) other loans, (2) office/retail
real estate, (3) multifamily real estate, (4) real estate owned land,
and (5) other real estate.  The average annual net holding cost for
disposed assets was 1.77 percent of book value, but three asset types
had average net holding costs greater than 4 percent.  These included
4.09 percent for office/retail real estate, 4.57 percent for land,
and 4.99 percent for other real estate.  In contrast, the figures
were 0.61 percent for the other loans category and 1.45 percent for
multifamily real estate. 

Four disposed asset types yielded average annual net holding
revenues--(1) commercial/consumer nonperforming loans, (2) other
nonperforming loans, (3) other performing loans, and (4)
single-family real estate.  These average annual net holding revenues
ranged from 1.72 percent of book value for commercial/consumer
nonperforming loans to 25.48 percent for other performing loans. 
Table 2 shows the average annual revenues, expenses, and net holding
amounts by type for disposed assets. 



                                     Table 2
                     
                      Average Annualized Revenues, Expenses,
                       and Net Holding Amounts for Disposed
                                      Assets


                                                                         Average
                                                                  annualized net
               No.    Average                       Total direct  holding amount
                of       book                        net holding   as percent of
Asset type   cases      value   Revenues  Expenses        amount      book value
----------  ------  ---------  ---------  --------  ------------  --------------
Nonperform     109   $168,565     $8,113    $5,181        $2,932            1.72
 ing
 commercia
 l
 consumer
 loans
Other           28    234,078     23,682     8,607        15,075            6.21
 nonperfor
 ming
 loans
Other           12    113,368     30,347     1,466        28,882           25.48
 performing
 loans
Other            2    926,133          0     5,631       (5,631)          (0.61)
 loans
Real            18    890,867     34,520    70,995      (36,475)          (4.09)
 estate
 owned
 office/
 retail
Real            38  1,598,646    216,234   239,469      (23,235)          (1.45)
 estate
 owned
 multifami
 ly
Real           241     73,762     17,399    13,415         3,985            5.27
 estate
 owned
 single-
 family
Real           316    166,730      4,775    12,388       (7,613)          (4.57)
 estate
 owned
 land
Real            42    859,413     47,063    89,918      (42,856)          (4.99)
 estate
 owned
 other
================================================================================
Total          806  $262,386\  $22,923\a  $27,622\    $(4,699)\a        (1.77)\a
                            a                    a
--------------------------------------------------------------------------------
Note:  Numbers in parentheses ( ) represent holding costs.  The data
are as of March 31, 1992. 

\a = Weighted average

Source:  SAMDA contractor asset files. 

For both disposed assets and assets still in inventory, we found that
net holding costs for real estate assets tended to vary according to
the asset's book value; generally, higher value assets were less
costly to hold, as a percentage of book value, than lower value
assets.  For example, real estate owned multifamily assets remaining
in inventory with book values between $1 million and $10 million had
average annual net holding revenues of about 3.05 percent of book
value, while those with book values of $250,000 to $1 million
incurred net holding costs of 5.15 percent of book value.  However,
no consistent pattern emerged among loan asset types.  For example,
commercial nonperforming loan assets remaining in inventory with book
values between $50,000 and $250,000 had average annual net holding
costs of 0.97 percent of book value, while those with book values of
$250,000 to $1 million had average annual net holding costs of 1.48
percent.  The results of this analysis suggest that RTC could decide
to develop specific disposition programs for real estate assets with
lower book values in an effort to minimize expenses associated with
these assets, relative to their book value.  Additional information
on holding costs by book value for each asset type appears in
appendix II. 


      AVERAGE HOLDING TIME LONGEST
      FOR TWO ASSET TYPES
---------------------------------------------------------- Letter :4.2

For both disposed assets and assets remaining in inventory,
